San Diego City Council Considers Auditing Questionable Real Estate Transactions

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101 Ash Street in downtown San Diego.  August 21, 2020

Photo Shalina Chatlani

Above: 101 Ash Street in downtown San Diego. August 21, 2020

An audit San Diego’s first public unfair real estate hearing took place Wednesday, at which city councilors said big changes were needed to restore public confidence.

The audit was prompted by the city’s disastrous attempt to lease and then buy a high-rise office building at 101 Ash Street. The city hoped to relocate hundreds of employees to consolidate its downtown workforce. But the date of entry was repeatedly delayed as the city found more and more problems with asbestos and the building’s HVAC and electricity systems. The latest cost estimate for necessary repairs and improvements is $ 115 million.

Former Mayor Kevin Falconer and his staff did not follow best practices, such as requiring independent evaluations and inspections of buildings, and withheld key information from the city council, the report said.

RELATED: San Diego Audit Issues Errors in Faulconer Managed Real Estate Transactions

“My 500-square-foot apartment has had more inspections than these city buildings,” said councilor Vivian Moreno, who chairs the council’s audit committee. “After seeing all of this in this audit, it is imperative that there is a due diligence checklist in front of the board when promoting every proposed property purchase.”

A checklist to ensure that every real estate transaction is in line with best practices is one of the main audit recommendations. Mayor Todd Gloria agreed to implement it.

RELATED: NBC7 Admits The 101 Ash Street Story Was Based On A Forged Document

In addition, the audit showed that the city did not give council members enough time to consider complex contracts and did not offer viable alternatives. Councilor Joe LaCava acknowledged that the security measures recommended during the audit could slow down the process of acquiring real estate in the city.

“We could lose a few good property acquisitions because we need extra time to make sure we’re doing everything right and the seller may not want to wait,” LaCava said. “And I think that’s okay. As I said, it is much more important to protect the city and protect taxpayers than to conclude a real estate deal. “

City Attorney Mara Elliott announced last month that the city will ask for a judge cancel lease agreements with title at 101 Ash Street and another downtown office building currently occupied by several city departments. Both deals were concluded on the advice of commercial real estate broker Jason Hughes.

The city’s amended lawsuit came after subpoenas revealed that Hughes, who claimed to be acting as a free volunteer, was actually paid $ 9.4 million in royalties by building sellers.

Although the audit focused on 101 Ash Street, other questionable real estate transactions were examined. These include the purchase of shuttered cities indoor skydiving equipmenty in the East Village and property in Kearney Mesa dedicated to repairing fire trucks, also uninhabitable

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